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Attorney General Brown Wins $160 Million Refund from the L.A. Department of Water and Power

Monday, October 27, 2008

Contact: (415) 703-5837, agpressoffice@doj.ca.gov

LOS ANGELES –Attorney General Edmund G. Brown Jr., announced today that the State of California and several local agencies, including the Los Angeles Unified School District and Los Angeles County, won a refund of $160 million for “illegal and unjustified overcharges” that the Los Angeles Department of Water and Power charged during a 10 year period between 1997 and 2007.

“The Los Angeles Department of Water and Power had been imposing illegal and unjustified overcharges on their governmental customers for several years,” said Attorney General Brown. “The L.A. school district and the other governmental agencies desperately need every available dollar in these hard economic times.”

The agreement stems from a case filed in San Bernardino County in 2000, State of California et al. v. Los Angeles Department of Water and Power, et. al, in which the Los Angeles Department of Water and Power knowingly overcharged State and local governmental agencies for electricity.

According to state law, municipal power authorities can only charge governmental customers a percentage of what it took to build the power generator and the grid based on the amount of power the governmental customer consumed. For instance, if a governmental customer used 5% of the electricity generated by a power facility, then it should be charged, over a period of time, 5% of what it took to build that facility. The state alleged that the Los Angeles Department of Water illegally charged its governmental customers a percentage far in excess of what they actually used.

At trial, the court found that the Department of Water and Power overcharged the State and the local governmental agencies and buried the charges in its monthly bills dating back to 1997, in violation of California law and the state Constitution.

Since 1997, the Department overcharged local and county agencies, including the County of Los Angeles, the Los Angeles County Metropolitan Transportation Authority, the Los Angeles Unified School District and the Los Angeles Community College District. Several state agencies were also overcharged by the utility, including UCLA, Cal State Los Angeles, Cal State Northridge, Caltrans, the California Highway Patrol, the Department of Corrections, Department of Motor Vehicles, Employee Development Department, the State Teachers Retirement System, Department of Parks and Recreation and the Department of General Services.

The agreement includes a cash award to state agencies of more than $6 million, plus more than $1.7 million in electricity rate credits and $11.8 million to fund projects that will reduce electricity consumption in state buildings. The remainder of the $160 million settlement will go to local governmental agencies in Los Angeles. The money they receive will be used in part to fund projects that will reduce electricity consumption at their facilities.

The money from the agreement will be distributed to the agencies as follows:

• $25.3 million to the Los Angeles Unified School District.
• $11 million to the Los Angeles County Metropolitan Transit Authority.
• $12.4 million to Los Angeles County.
• $1.3 million to the Los Angeles Community College District.
• $6.1 million to the State of California.

In addition to the aforementioned cash award, the Department of Water and Power will also deposit the following amounts into accounts setup by the state and local agencies to fund projects that will reduce energy consumption.

• $28 million to the Los Angeles Unified School District.
• $11 million to the Los Angeles County Metropolitan Transit Authority.
• $13 million to Los Angeles County
• $4 million to the Los Angeles Community College District
• $11.8 million to the State of California

After the case was filed by a whistle-blower under California’s False Claims Act, the Attorney General intervened and pursued several claims against the utility. The False Claims Act authorizes the Attorney General to prosecute an entity for knowingly submitting fraudulent claims for state funds.